Betting on Politics – Skill (and Emotion) over Chance

Betting on Politics – Skill (and Emotion) over Chance

The KTO team strives to deliver real-money entertainment that matters to people. What we run is as much a gaming site as it is a platform for serious players who carefully study and prepare their wagers.

KTO offers the possibility to bet on national and local elections because they are highly relevant to a big part of our fans. High-profile political races excite people, in Brazil and almost anywhere around the World. Millions spend hefty sums when they expect their candidate to win but also bring them a profit in the process.

Democratic elections are important for the social, economic and cultural impacts they produce in the years after. Nonetheless, it is stimulating to gamify such important matters and, where possible, cash in on one’s knowledge of politics.

The KTO research team takes a closer look at the betting markets, user profiles and choices made by those who decided to wager on the last elections’ cycle in Brazil.

Politics Betting as a Growing Online Industry

Wagering on elections (and important socio-political events in general) has truly become a global niche market in the past decade. Abundant information on world events, digital media exposure and remote access to mobile betting platforms combine to set up a dynamic betting scene.

The 2020 Presidential elections between Biden and Trump in the United States generated a turnover of more than USD 1 billion, considering only the biggest bookmakers’ data. It is true that this was an event that was extensively publicized, resonating globally for months before and after.

With due considerations of proportion, however, we can see similar coverage and media exposure for many national elections and even cross-border politics (e.g., the European Union and its relations with the UK). Popular election betting markets include the likes of Australia, Brazil, Canada, France, Philippines, Germany and the UK.

Perhaps surprisingly to the general public, wagering on politics in the USA is unregulated and practically illegal, if the operator or website is based on its territory. Then again, sports betting is legal and quite heavily advertised, which leads many players to assume that they can bet on elections and political events with their favorite local bookmaker.

Notably, websites located elsewhere are legal and accessible to all, unless explicitly declared otherwise by courts, which is not a common practice in the absence of ad hoc laws.

More importantly, we are considering events that go beyond the thrill of real-money gaming. They are held in a competition format, with somewhat different rules, rounds and counting systems, depending on location and officials’ roles. However, their outcomes have a big impact on society, even outside one’s own well-being and financial prosperity.

These kinds of stimuli show why the phenomenon of election betting is not recent in human history. There have been known cases since at least the Middle Ages, with the papal succession elections an emblematic example from 1503.

In modern times, major industries also evaluate political competitions for their spillover effects. Leading asset management funds track the pre-election polls and outcome odds for their impact on commodity markets and the economy in general. In fact, analysts even speak of volatility and opportunity, concepts closely related to gambling psychology.

On one hand, this brings us to the common dynamics shared by elections (planning and wagering) and various financial markets (researching and investing). On the other hand, this shows exactly why it is difficult to legalize and regulate betting on politics on a bigger (global) scale.

In the US, the market with the highest possible profile in politics, regulators like the Commodities Futures Trading Commission (CFTC) have been known to liken gambling on politics to futures exchanges. They have so far blocked the legalization of the industry on American soil, even as experts point out that it could be “bigger than sports betting” and currently siphons funds elsewhere.

Startups and institutional investors claim that election betting has the potential to become a trillion-dollar market. In late 2022, the debate on opening up to regulated politics wagering got a lot more attention, despite fears that it would endanger certain democratic values.

Online tech industry aims to convince authorities that this is a new kind of service for retail investors and end users that reflects a new-generation mentality. Nowadays, casual market players dig into articles and data about cryptocurrency, market options and company equities, and enjoy easy access to trading apps and betting sites.

Adding a degree of fiscal transparency to an existing market is always a good thing for any government and jurisdiction. Even so, gambling on politics remains a sensitive topic even where it is legal and well-accepted. Stimulating voter turnout is a positive after-effect, undoubtedly; influencing campaigns, public opinion and potentially manipulating markets is never desirable, as politics affect all of us.

In the end, and despite varying degrees of adoption worldwide, politics betting is rapidly gaining acceptance, especially among younger users, tech industries and investors.

How Does Election Betting Work?

Real-money bets work in a similar manner in a number of knowledge-based industries, as recognized by scholars with a background in investment and financial trading. Comparisons between betting on sports, political elections and stock markets are easily invoked and justified.

All of the above have in common a number of elements – plenty of potential participants considering themselves knowledgeable enough to risk monetary amounts on possible event outcomes. The financial incentives are comparable, as is the access to information “in competitive settings.” Those who are more efficient in handling such information – and behave more rationally than emotionally – in the long run are expected to be more successful.

This line of reasoning also reminds us that all of the above betting markets rely mostly on knowledge and calculations. We can also extend the argument to the influence of external actors on the events and competitions that are subject to investment decisions. These may be the nature and intensity of business partnerships, media coverage and visibility, public or private financing, followers and contributors and much more.

All of these are fine distinctions that should be factored in when estimating election results. Similarly, sporting bets (and other markets) are based on calculations and “tangibledata such as team and player form, athletics shape, home advantage, other technical and psychological considerations, even weather conditions. The list is potentially infinite for both sides – sports enthusiasts and bookmaker agencies.

Ultimately, the elevated degree of competence and data elaboration requires specialized services. The top betting platforms rely on external data providers such as Sportradar, iSports API, FantasyData, Goalserve, SportsDataIO, to name some of the giants. They gather, analyze and offer an impressive series of big-data bases that serve as a true backbone of the industry.

In the case of elections and political events, polls are the cornerstone source of relevant information, as they reflect public sentiment with a statistically computable deviation. They also track scenarios that evaluate historical changes in these factors and estimate potential future developments. 

Subsequently, bookmaker platforms use the data to generate the various quotes, bet types and dynamically updatable offers they make to players.

Brazilian Presidential Elections as an Illustrative Example

The 2022 Presidential elections between Inácio Lula da Silva and Jair Bolsonaro were felt and reported as a landmark event in Brazilian politics. The campaign resonated globally, stressing the importance of the nation’s standing even beyond continental borders.

To put the significance of these elections in perspective – the 2022 Copa Libertadores Final was played on 29 October (in Ecuador), a day before the runoff (second round). The biggest trophy in South American football – the biggest sport on the planet – was between two Brazilian sides, Flamengo and Athletico Paranaense!

On top of that, the team with the bigger fanbase (Flamengo) won. And yet, in the weeks and even days surrounding both events, the sports game took a step back and was deemed less important by all media accounts.

Coming back to betting and odds calculation, the bookmakers estimated Lula to be the favorite, although not all agreed on by how much. In the first round, bets on Lula paid on average around 1.50 while most had Bolsonaro above 2.00, more around 2.50.

In the runoff, when fringe candidates were out of the picture and reality had shown that the difference between the two is not so pronounced, Lula was quoted at around 1.30. Bets on Bolsonaro were much more tempting, upwards of 2.50 with some bookmakers paying as much as 3.00 times the wagers placed.

Namely because of that logic – the incumbent was behind but not by much, trusting that he might cause an upset which pays rather well – there were more bets placed on Bolsonaro, nationwide.

Even so, most people tend to bet on their favorite and less so against their beliefs, even if that goes against the possibility of winning a certain amount of money. Some go as far as putting and winning large sums on their preferred candidate. Others, of course, wagered dispassionately on who they thought would win.

Some placed bets informally, against friends or acquaintances, even putting up personal belongings and valuable property. The overwhelming majority chose online betting platforms and gaming sites that had the option, with a leading player.

Top Betting Markets in 2022 Politics

The table below represents the top 20 markets (i.e. bet types) that were picked by our users.

They are arranged in a descending order of active players’ share, largely coinciding with the bet counts (number of coupons placed) but not always. We have also provided the share of turnover generated by these markets, excluding winnings paid out.

Worth noting is that the figures of active players’ share exceed the sum of 100% simply because some users chose to place more than one bet.

As we can see, unsurprisingly, the main issue of the overall winner is the leading markets, attracting 71.74% of all bettors, over 40% of the total bets and over two thirds of the total amounts bet.

Next up, by some distance, was the question whether the (presidential) elections would be decided after a single round. Since none of the candidates received more than 50% (Lula had 48.43% and Bolsonaro 43.20%), the elections went to a runoff.

In both scenarios, bettors – who are also voters, of course – believe they know who will win and if he will do it by getting enough valid votes. These are linear, straightforward markets that stick to the big picture. Fundamental questions like win or lose are the backgrounds of the very campaign, its surrounding dynamics and subsequent societal effects.

Event betting is not always and not completely binary. Bookmakers try to satisfy all possible desires and cover as many outcome nuances as possible. The fact of the matter is that KTO went well beyond the presented top 20 – we have registered sufficient activity for 55 total markets, with many others offered but registering little or no interest.

Still, what remains in history is the final result of the presidential contest and that is what moves people, both voters and bettors.

Once again, this puts politics betting in the same room with sports booking. Akin to elections, the most popular betting option for “recreational” and occasional players to bet upon is the overall winner of the contest. Choosing a competition winner is offered by all operators and has straight up odds, requiring no further system or rules to know or be able to understand.

The most common odds and bets also include over/under total scores and final score. They are also comparable to the count of valid votes, translating into first-round wins or differences in vote shares. But they are all relatively simple bets, based often on a binary pick or at least a limited scope of choices.

Less Common Markets and Regional Activity

When it comes to less conventional betting markets, some outside the top 20 (not shown above) require extensive research, even a pinch of luck to get them right. An example would be “How many women will be elected federal deputies?” It attracted a total of 0.88% active users.

Overall, however, 50.95% of bet counts were placed on markets with national significance. The rest, nearly half, were placed on bets that were more important (and required more knowledge) about their own state of voting, e.g., members of federal parliament, governors or senators.

The table above shows that the most active bettors come from the states of Rio Grande do Sul, Minas Gerais, São Paulo and Santa Catarina. Less active but still noticeable are bettors in Maranhão, Paraná, Bahia, Pernambuco and Mato Grosso do Sul.

Practically all of the above reflects the online traction, activity and gaming habits we already highlighted in our previous study.

In addition, we have certain cities standing out with plenty of placed bets and markets picked up – the likes of Nova Pádua (RS), Balneário Camboriú (SC), Pires Ferreira (CE), Garanhuns (PE), Central do Maranhão (MA). Interestingly enough, they are not even capitals, showing a mixture of interest in politics and a habit of gambling that goes beyond population size.

Motivations behind Leading Five Betting Markets

If we focus on the top 5 markets, we can break down some interesting figures within the bets, in terms of relative shares among active bettors, bet counts and turnover. These transpire both something on the level of preparedness of bettors but also their “gut feeling”. The outcome shows less impulsive decisions and more of a willingness to place money on one’s own rational beliefs.

First off, the overall winner:

The table shows that either fewer believed in Lula’s win or many bettors chose to place a small amount on an upset (that pays well). Simply because his admirers – or calculated supporters, to the extent of placing a cash bet on him – showed more belief in his win. Since polls can rarely be wrong by a lot, the large portion of sums went towards a Lula win, resulting in almost two thirds of the turnover being bet on that outcome.

For those quick to add numbers, you may notice that these numbers do not add up to 100%. Simply because a minuscule percentage (a ¼ of a percent in total) was bet on what would be shocking wins of Ciro Gomes, Joao Doria, Simone Tebet or Sergio Moro.

The table we see above expands on the same logical background, emphasizing the small difference between the contestants and a likely second round. While the firm supporters (or calculated sponsors) imagined a first-round win for one of the two candidates, the probability of a sweeping win did not look likely. When it came to put their money where their claims lie, over 70% of the sums went towards the prospective runoff.

Last in the top 3 came a market that reflects the impressive involvement of Minas Gerais residents with both politics and competitive real-money betting.

The fact that they chose Bolsonaro to win in their state – less than 60% of users and bet counts but with nearly three quarters of the amounts placed – points to a few facts.

The first is that they were clearly wrong with their choice. Which leaves us with the sole possibility of players going for an upset, especially since the difference between the two candidates was narrowing, according to the polls and media reports.

And, in fact, they came quite close. Bolsonaro reduced Lula’s advantage from 560,000 to less than 50,000 valid votes. While on a national level the difference between the two was 1.8%, in Minas Gerais it was only 0.4%, showing us that the race was really tight. What is more, people were very much aware of that – bettors are well-informed and prepared and the risk was calculated even though such bets did not succeed.

Emotions vs Knowledge and Skill

All of the above facts and behavioral dynamics indicate that bettors like to make informed decisions, regardless of their chances of getting the final answer right or wrong. Once again, there is a direct link to the motivations behind sports betting, based on team and athlete knowledge, current form and various external conditions.

Preliminary information about the outcome of sporting events includes the evaluation of a series of psychological factors. Politics is also subjected to socio-economic influence and much more media conditioning. Both sectors are affected by contestants’ personal preparation – physical and mental in the first case, mostly mental in the second.

Most often, bettors and observers cannot fully estimate these dynamics as they are not rendered public. Psychological evaluations and motivational drives are done by contestant teams and remain insider information. The same is actually true in most cases for the complete financial capacity of the sides, although much of it should be public.

These are areas where voters, bettors – and investors, when we consider resemblances to risk investments – have to rely on their personal perception, their gut feeling in other words. It is not uncommon for them to act (bet) based on their emotions. Whether we call it a preference or an intuition – about a candidate/party, player/team or a commodity – it might not be a good idea when placing money on the line. But it inevitably happens for some players and investors, based on the thrill of risking something for a potential win.

Odds pricing in the three sectors – politics, sports and markets – has quite a few elements in common. On one hand, they are updated in real time, as much as possible. These dynamics come from election polls, market or sports-related data but they all are the result of the above discussed scientific methodology.

On the other hand, the pricing of betting markets – i.e., events, (political) figures and outcomes – is done more evenly in favor of popular sentiment. That is to say, the favorite competitor is boosted a little more by bookmakers, whether they are in the lead (increased) or behind (narrowed). Since bettors that act upon popular preference are the majority, this stimulates the placing of more bets.

It also means that upsets and underdogs are priced on probabilities but with a pinch of commercial adjustment. They need to be attractive enough to offer a solid return but not excessive to put the financial solidity of the bookmaker at risk.

Understandably, this is done to call emotions into play. Such pricing strategies tend to take the edge off superior knowledge. On the contrary, systematic study and diligent preparation is likely to pay off for bettors and investors that are less influenced by their impulses or intuition. 

The Popularity of Local Politics

We have seen how – and why the majority of voters and bettors are moved by the bigger issues and national-level contests. Still, regional and local politics end up evoking quite the interest where they have more impact.

The same structured approach is valid for data firms and betting sites. For the locals, however, it is both rather likely that they have more knowledge about regional matters, as well as stronger feelings about outcomes and candidates.

The table above shows bets in Rio Grande do Sul prior to the second round of gubernatorial elections. The former Governor – Eduardo Leite – had just resigned earlier in 2022, before the start of the election campaign. The figures show he had strong support and returned to office for a reason. Betting activity proves that few locals believed his conservative opponent could have unseated him, and even fewer amounts were placed on an upset.

The same state was more evenly split on the chances of their Senators. Although the race was not that close (44.11% vs 37.85% between Mourao and Dutra), it is emblematic that the above candidates arrived in the same exact order. Punters were right all along.

Statistics support the fact that bettors, sports enthusiasts and investors prefer bigger, binary and more simple markets, involving fewer betting systems if any. But those motivated to bet – particularly on political contests – are usually quite knowledgeable in public matters and figures, even more so if they are local.

Political campaigns inevitably leave their mark, yet citizens are quite able in monitoring relative positions of candidates, even when their sentiment transpires. What they actually end up doing (through polls and betting behavior) is help define betting markets and improve the precision of odds.

A Summary of Demographic Factors

“Overall winner” remains the most important market. The demographics related to that bet type are quite significant in outlining the betting profile of our users.

KTO has data for bettors ranging from 19 to 77 years of age, as well as from the most active states. The table below shows the age distribution of those who bet on Bolsonaro to win, regardless of round.

Bolsonaro to win:

A corresponding distribution is also available for players backing up Lula:

In both cases we see that 32-year-olds are most active. And in general users between 24 to 42 are the major cohort of those motivated to place a bet on an election winner. It contains 76.11% of the bettors on Bolsonaro and 72.01% of those who placed a bet on Lula.

There are differences within the same age group as well. Those who bet on Bolsonaro were more consistent, convinced and active, peaking at shares of over 5.5% of bets made in the 30-somethings.

Lula supporters – or those who pragmatically thought he would win – extend further into the 40’s, even well into the 50’s. These are of considerably higher mean expected ages than those who placed bets on Bolsonaro.

Lastly, we present to you the shares of bets placed (on a winner) in the context of their state distribution.

Once again, these figures are largely in line with our previous findings that saw the Southeastern and Southern States dominate the real-money gaming scene in Brazil as per our data.

Rio Grande do Sul’s top position is even more evident, partly due to the marketing success of KTO and the gaming traditions in place. The likes of Santa Catarina and Minas Gerais are also consistently active.

With the due caution, the bets placed can also be treated as a survey of people’s expectations of a winner. In turn, these can be attributed to regional cultural mindsets – meant as liberal or conservative – or the actual influence the given candidate has accumulated in those states.

Santa Catarina, Paraná and Mato Grosso do Sul, for example, have a third more betting on Bolsonaro, with their due distinction of population size and player activity. All three are known to be well developed (with higher standard of living) but also more conservative.

When we look at states and regions which are dominated by larger metropolitan areas (e.g., Rio de Janeiro, São Paulo), we see much more users betting on Lula. Be it for their “leftist” aspirations or simply being more liberal, it is not an unexpected result by all media accounts.

Based on the above data, we can reasonably depict the typical bettor on these elections as a 32-year-old from Porto Alegre. However, such conclusions merit a more profound study of bettor profiles and real-money gamer traits.

Conclusive Observations

Democratic elections are a contest decided by informed choice. In a gamified version, betting on politics is also motivated by interest in their public significance but the actual wager depends on a combination of knowledge, informal research, personal preferences and even emotions.

Bettor accounts testify that election gambling can make you a “better-informed citizen.” It can push people to understand voting rules, political procedures and public issues better, simply because they have invested actual sums in the game of politics.

Ultimately, the majority of bettors chose big, common markets. Most people bet on single results, without a particular system, unless they know more about the specifics of local politics.

Still, the figures we analyzed above show that people are rarely wrong about election outcomes. And if they are, it is not by a lot and almost never about their own state or city.

Important events and personality contests which impact society often involve beliefs and emotions that go beyond data and statistics. We frequently see the entire fandom of a politician participate in heated campaigns, with many external parties getting involved to a different extent.

These social dynamics are much akin to the devotion to sports. Betting on politics, therefore, shares many traits with sports betting and, as we have seen, other market investments. Punters and market players respond to stimuli which helps them feel part of the event. Digging deeper into factors, odds and prices gives people the perception of control, even over bet outcomes.

election betting profile